Continental Airlines posted a $146 million losss for the first quarter attributed to a weak economy, poor weather and a $10 million charge related to severance and aircraft.

"I'm disappointed with our first quarter results, which were impacted by the weak economy and the challenges we experienced with weather related closures of our Newark Liberty hub," says Continental Chief Jeff Smisek.

The carrier also suffered a loss over the past week because of the ash cloud in Europe, cancelling 400 international flights costing an estimated $24 million.

Revenue increased 7% to $3.2 billion. Consolidated RPMs increased 5.7% while capacity remained flat year over year producing a load factor of 79.5%.

"The economic environment is clearly improving, however we are still in the early stages of recovery," Smisek says. "Business travel is coming back, but it's coming back slowly."

In the first quarter, Continental strengthened its international network by adding new daily service from Newark to Munich and increasing the number of daily flights to London Heathrow to four. A fifth flight will be added in October.

As of 1 June, all scheduled service for Heathrow will offer new flat-bed seating in business class.

Smisek says the carrier is "clearly in a battle" with Delta in New York and in South America, but adds, "We certainly hold our own with the product".

He says news rules from the US Department of Transportation (DOT) regarding flight delays will have little impact. "We've had a good program in place for quite a while. We haven't had a single long tarmac delay since last August."

As airlines struggle with the increase in fuel costs, Continental sees the use of more fuel efficient aircraft as the "best hedge against rising fuel prices".

In the last quarter, the carrier retired three 737-300 aircraft from the fleet and took delivery of a 757-300.

The company expects to have winglets installed throughout the narrowbody fleet by the end of the second quarter 2010.

Product improvements continue with the installation of DIRECTV on 83 aircraft, expanded mobile boarding pass service to Heathrow, installation of lie-flat beds in business seats and plans to introduce a buy-on-board "healthy meal" program later this year.

While speculation continued to swirl on merger talks with United Airlines, Smisek declined to discuss it, saying only that the company would act in the best interest of its stockholders, employees and customers.

Source: Air Transport Intelligence news